The state is overhauling how it hires and fires state employees, a move Gov. Bill Haslam contends “might be the most important” task his administration has undertaken since he took office.

Haslam signed HB2384into law Tuesday, a bill that stresses employee performance over seniority, creates a worker evaluation system and paves the way for merit pay among top-performing state employees.

“We want to make certain that when we hire new employees, when we decide who gets promoted, we really are promoting and hiring those folks who can best serve our citizens. That’s what it’s about,” Haslam told an audience of 100 or so state workers outside Tennessee Tower, a 31-story building down the street from the Capitol Building filled with state employees.

Tennessee’s workforce is aging, Haslam added. The administration notes that 40 percent of state employees will be eligible to retire in the next five years, and those workers will need to be replaced.

The Tennessee State Employees Association originally fought the changes, which were handcrafted by Haslam’s administration. The union, which represents some 40,000 state workers, argued shifting employment decisions away from tenure would open the door to politically-driven hiring and firing decisions.

But even the tenure system could be abused, Haslam said.

“There’s a whole lot of unfilled executive positions right now in state government. … So if you just wanted to hire your buddies, you could do that right now,” Haslam told reporters.

The union eventually signed on in support of the bill after securing a 2.5 percent raise for all state employees, a say in developing the new evaluations and other concessions like ensuring tenure is still taken into account in hiring and firing decisions.

“State employees and their families can rest easier knowing important job protections that exist under the current civil service system are still in place in the new law,” TSEA President Phil Morson said in a statement.

Lt. Gov. Ron Ramsey hailed the policy shift as suggestive of the kinds of reforms likely to occur going forward if Republicans continue to dominate elected posts in state government.

“Tennesseans gave Republicans a mandate to transform state government into an efficient, transparent entity that puts a premium on customer service,” Lt. Gov. Ron Ramsey said in a statement. “This landmark reform is incontrovertible proof that it matters who governs.”